Welcome to Edition 81 of Boardroom Brief.

This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

A short week due to the Queen’s Birthday.

YOUR KEY BOARDROOM BRIEF

ASX releases Compliance Update for September 2018. On 19 September 2018, ASX released its Compliance Update for September 2018. In this Update, ASX clarifies the circumstances in which it will generally pause trading of a listed entity’s securities and confirms that ASX will now publish a notice to the market whenever it imposes a pause in trading in order to notify the market to expect a further announcement in due course explaining the reasons for the pause. Guidance is also provided on: (i) how to comply with key corporate governance disclosures under Listing Rule 4.7; (ii) how to avoid disclosing potentially misleading peer comparison tables in presentation slides (eg, market capitalisation or resource/reserves comparisons); and (iii) when announcements referring to placements having been “over-subscribed” are permissible.

ASIC reports on climate risk disclosure by ASX-listed companies. On 20 September 2018, ASIC released a Report on climate risk disclosure by ASX listed companies which found that: (i) 17% of companies in ASIC’s sample identified climate risk as a material risk in their operating and financial reviews; (ii) climate risk disclosure practices were considerably fragmented (making comparisons for investors difficult); and (iii) climate risk disclosure by listed companies outside the ASX 200 was limited. Among the recommendations made by ASIC for improved disclosure practices in the market, Directors and officers are encouraged to adopt a probative and proactive approach to emerging risks, including climate risk. 

ASIC clamps down on misleading ICO and crypto-asset disclosures. Since ASIC’s grant of new regulatory powers in April this year in relation to initial coin offerings (ICOs) of crypto-assets, ASIC has taken action to prevent several proposed ICOs targeting retail investors which has included issuing final stop orders on product disclosure statements. Directors or companies dealing with crypto-currency assets or considering ICOs to raise funds should be aware of tighter regulatory scrutiny in this area. 

What might executive remuneration schemes look like in a post-Hayne Commission world? Against the backdrop of the wave of finance sector scandals, NAB unveiled last week its view that bank remuneration schemes ought to place greater reliance on conduct and compliance (over traditional financial metrics); more of a direct link between performance of an individual with performance pay; a separation of rewards for risk and compliance executives from those of line executives; more remuneration generally ‘at risk’, deferred and capable of being clawed back; and board remuneration committees more active and accountable for their outcomes. Directors should consider revisiting their remuneration policies in light of the increasing pressure on companies generally to strengthen disclosure and compliance obligations.

THE WEEK AHEAD

Australia in the crossfire of the US-China trade row. Last week, the Trump administration followed through on its threat to impose another $US200 billion ($280 billion) of tariffs on Chinese imports, pushing two of the world’s most important economies to the brink of a full-scale trade war that will have flow-on implications for Asia and Australia. Since April, the yuan has depreciated against the US dollar. Lower economic growth in China will no doubt adversely impact the rest of Asia given critical supply chain interconnections. For Australia, lower Chinese growth will directly impact its resource exports. Australia will also be affected given the link between its currency and financial markets with the Chinese economy, with lower Chinese growth likely to directly impact Australia’s resource exports.

Government’s consultation on reforms to combat ‘phoenixing’ by directors closes this Thursday. As previously reported in Boardroom Brief, the exposure draft legislation and explanatory materials are intended to clamp down on the establishment of new companies to continue the business of another company that has been deliberately liquidated in order to avoid paying debts to creditors. 

Annual reports (June year-end) due this Friday. Under the ASX’s new “get tough” approach, failure to lodge periodic reports in time will result in an automatic suspension of the entity’s securities.

AGM season. For companies with a 30 June year-end, AGMs will need to be held by 30 November. Companies are reminded that draft Notices of Meeting must be submitted to ASX for review and new voting exclusions apply (such that excluded persons are only precluded from voting in favour of a resolution).